In hindsight, the irrational market share supremacy of Netflix (NASDAQ: NFLX) stock over that of Disney (NYSE: DIS) does not look frothy. After Netflix passed Disney in market cap, Disney stock proceeded to bounce from yearly lows and to close near yearly highs at the $108.85 level. Will this hold?
When Netflix is trading at yearly highs despite a 1.6x debt / equity, the value of subscription growth over fundamentals cannot be ignored. Disney’s Fox (NASDAQ: FOX) acquisition followed with Comcast (NASDAQ: CMCSA) mustering up debt financing and support to bid more for the unit.
If Disney loses Fox, investors no longer need to watch Disney spending $10.8 billion on the company. Further, AT&T’s (NYSE: T) buyout of Time Warner’s (NYSE: TWX) going ahead removes the risk of a $2.5-billion breakup fee Disney would have had to pay if the deal were blocked.
But for Disney’s latest bounce to the $108 – 109 level, chances are mixed that the stock will hold the rally. The stock is now at fair value, based on 12 finbox.io models. Wall Street is even more optimistic, with a $119 average price target.
Takeaway
Few analysts updated their view on Disney stock. When companies like Viacom (NASDAQ: VIAB), CBS (NYSE: CBS), and Comcast trade at a discount, investors may consider those stocks ahead of Disney.
